Selling Off Public Infrastructure: A Government Of, By and For Capital
There’s a new gold rush—buying revenue-generating public infrastructure from state and local governments. It’s another misguided Libertarian / Conservative orgy of privatization. We all know how this ends: international capital wins, middle class Americans get ripped off.
BusinessWeek: …In the past year, banks and private investment firms have fallen in love with public infrastructure. They’re smitten by the rich cash flows that roads, bridges, airports, parking garages, and shipping ports generate—and the monopolistic advantages that keep those cash flows as steady as a beating heart.
With state and local leaders scrambling for cash to solve short-term fiscal problems, the conditions are ripe for an unprecedented burst of buying and selling. All told, some $100 billion worth of public property could change hands in the next two years, up from less than $7 billion over the past two years; a lease for the Pennsylvania Turnpike could go for more than $30 billion all by itself.
…The aggressive toll hikes embedded in deals all but guarantee pain for lower-income citizens—and enormous profits for the buyers. For example, the investors in the $3.8 billion deal for the Indiana Toll Road, struck in 2006, could break even in year 15 of the 75-year lease, on the way to reaping as much as $21 billion in profits, estimates Merrill Lynch & Co. (MER ) What’s more, some public interest groups complain that the revenue from the higher tolls inflicted on all citizens will benefit only a handful of private investors, not the commonweal.
There’s also reason to worry about the quality of service on deals that can span 100 years. The newly private toll roads are being managed well now, but owners could sell them to other parties that might not operate them as capably in the future. Already, the experience outside of toll roads has been mixed: The Atlanta city water system, for example, was so poorly managed by private owners that the government reclaimed it.
April 30th, 2007 at 2:32 am
Is there some reason we should think that bureaucrats are better at running a business than people who do it for a living?
Civil servants haven’t a clue what they’re doing, which is why the global trend over the past several decades has been toward expertise, rather than ideology.
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April 30th, 2007 at 6:43 am
A lot of this fancy schmancy stuff is catching the states off guard. They are swept away with all the “hullabaloo” with these “public/private partnerships”. Isn’t this a form of corporate fascism? I’m opposed to most of this outsourcing of infrastructure because
A. this is what the NAFTA Superhighway is about
B. the government is supposed to control the means of commerce. (roads bridges, ect…)
http://en.wikipedia.org/wiki/Commerce_clause
April 30th, 2007 at 6:54 am
And the Spanish owned Cintas Corporation is gonna try to weld together the U.S., Canada, and Mexico through the NAFTA SUPERHIGHWAY with the NORTH AMERICAN UNION a.k.a. the “three amigos” scheme.
April 30th, 2007 at 9:09 am
David O’Rear: Yes, there is a huge reason. Because the government’s sole goal in managing these public assets is NOT profit–it’s public good. They are two very different paths and outcomes.
How do sky-high tolls serve the public good? Did you notice the Atlanta water system fiasco in the last sentence of the excerpt? That’s reason #432.
April 30th, 2007 at 10:39 am
I have a problem with granting monopolies especially to foreign countries controlling our infrastructure.
May 1st, 2007 at 8:02 pm
The Bush administration is helping multinationals buy U.S. municipal water systems, putting our most important resource in the hands of corporations with no public accountability.
http://www.alternet.org/envirohealth/50994/
May 2nd, 2007 at 5:31 am
LeftHook,
Personally, I’d rather have a well-run business than one that is determined not to make a profit, for not-making-a-profit’s sake.
The number of very badly run public sector utilities far outweighs the number of well run ones, worldwide.
Sky-high tolls? In a well-run privatization program, there are mechanisms for determining tolls (utility rates, phone charges, etc.).
Company applies to the regulator to raise prices; Regulator examines the data (inflation, investment, etc)and approves or not. Very simple.
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Mr Konop,
If that “foreign company” you mention is listed on the New York Stock Exchange, would that be OK?
Would that make it ‘merican enough for you?
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May 2nd, 2007 at 5:51 am
The biggest issue is the PRO monoply guys like you kill small business and consumers.
Hey China corners 97% market share on vitamin C and now prices are going out of control. China can even poison us and you think that is the fee market!
May 2nd, 2007 at 8:31 am
David
There’s no need to “run” our highways today for the most part, especially compared to the cost of “running” toll roads. So who bears the burden of “running” these toll roads? the truckers, the commuters, the people who want to just get out and DRIVE SOMEWHERE. Who benefits? Large multinational Corporations. What else suffers? Domestic commerce. No problem for the “free traders” I’m sure.
May 2nd, 2007 at 8:39 pm
Yeah, it was so much easier when you just plowed through the open fields in your buckboard.
Sheesh.